CALGARY, Alberta Feb 24 (Reuters) - Cash flows from the
Canadian oil sands will fall by $23 billion and turn negative in
the next two years, energy consultancy Wood Mackenzie said in a
report on Tuesday, as low crude prices make it less economical
to extract tar-like bitumen from the sands.

The oil sands of northern Alberta hold the world's
third-largest proven crude reserves after Saudi Arabia and
Venezuela, but operating costs are among the highest globally,
according to Wood Mackenzie principal analyst Callan McMahon.

Current operating costs run about $37 per barrel for thermal
oil sands projects, in which steam is pumped underground to
liquefy the tarry bitumen so it can flow, and $40 per barrel for
mining projects.

The price of West Texas Intermediate, the benchmark U.S.
crude, has tumbled by more than half since June to trade
around $50 a barrel.

Given the price dive, Wood Mackenzie said the oil sands
region's 2015 through 2016 cash flows would drop from $19
billion to minus $4 billion, a 120 percent fall. It assumed an
average West Texas Intermediate crude price of $55 a barrel in
2015 and $65 a barrel in 2016, with bitumen trading at a 40
percent discount to WTI.